Bernstein reiterates rating on Stitch Fix stock, sees growth in FY26 By Investing.com

On Wednesday, Bernstein SocGen Group maintained its Market Perform rating at Open Stitch Fix Inc. (NASDAQ:) stock at a firm price of $3.50. The firm's outlook for the online personal styling service remains cautious because expected growth is more than a year away.

According to the firm, Stitch Fix's valuation is expected to be price-sensitive for now, as long-term growth prospects are unclear in the competitive e-commerce environment.

The analyst noted that while Stitch Fix may evolve into a profitable and sustainable business, the total adjustable market (TAM) of the company's business model is uncertain. This uncertainty is expected to continue for another year, with positive growth predicted until the financial year 2026 (FY26).

Despite improving performance metrics, this lack of clarity on long-term growth may keep the stock price from breaking out of the current range.

Stitch Fix's latest financial guidance showed top-line growth declining by 16% in fiscal year 2025 (FY25). This assumption contributes to the company's position to sit on the sidelines until there is a clear path to growth. The company suggests that as the company gets closer to FY26 and if the growth prospects improve, there could be a significant increase in the stock's valuation.

The company's comments show optimism for the future, noting that Stitch Fix is ​​improving its performance. However, the competitive nature of the e-commerce sector poses challenges that need to be addressed before any significant valuation changes can be expected for the company's shares.

In conclusion, Bernstein SocGen Group's Market Perform rating suggests that investors may not see much movement in Stitch Fix's stock price until the company shows a clear growth path, which is currently expected to be seen in FY26.

In other recent news, Stitch Fix Inc. reported a wider-than-expected loss for its fiscal fourth quarter, with a loss of $0.29 per share, missing analyst estimates for a loss of $0.20 per share. The company's revenue also fell 12% year over year, to $319.6 million.

Despite this, total revenue slightly exceeded the consensus estimate of $318.48 million. Canaccord Genuity adjusted their price objective on Stitch Fix to $3.50, down from $4.50, while maintaining a hold rating on the stock.

This comes on the heels of Stitch Fix's latest forecast for the first fiscal quarter of 2025, which fell short of analyst estimates. The company expects revenue of between $303 million and $310 million, compared to an expected figure of $331.3 million. In addition, the company's active client numbers are down nearly 20% year-over-year, now standing at 2.51 million.

Despite these challenges, Stitch Fix is ​​taking steps to revitalize its business, including a review of the customer experience and a streamlined cost structure. These are the latest changes from Stitch Fix Inc.

InvestingPro Insights

Stitch Fix, Inc. (NASDAQ:SFIX) presents a mixed financial picture according to the latest data from InvestingPro. Although the company has more cash than debt, which is a sign of a healthy balance sheet, analysts are worried about its profitability. They don't expect Stitch Fix to be profitable this year, consistent with Bernstein SocGen Group's cautious stance. In fact, the company's stock has seen a lot of volatility, with a significant decrease last week, however there has been a significant price increase in the last six months, which shows some optimism for investors.

InvestingPro Tips highlights that three analysts have revised their ratings down for the future, suggesting a possible improvement in Stitch Fix's operations. However, the company trades at a low earnings multiple, with a P/E ratio of -3.66 and a PEG Ratio of -0.07. Revenue for the last twelve months from Q3 2024 stood at $1.43 billion, marking a decline of 16.44%, supporting the company's forecast for a slowdown in top-line growth.

For investors looking for more in-depth information, there are additional tips available from InvestingPro. The platform offers comprehensive analysis, including a fair price estimate of $5.51, which is higher than the current analyst target of $3.50. These differences may indicate potential undervaluation of the stock, providing a different perspective for investors considering Stitch Fix's future prospects.

Ultimately, while the company's near-term status remains uncertain, InvestingPro's data and tips provide valuable context for investors as they weigh their options with Stitch Fix. For those interested in exploring further, additional InvestingPro Tips are available to help make informed investment decisions.

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